Magnesium Prices Are Pressured in Q1 amid Weakening Demand

SHANGHAI, Mar 3 (SMM) - Domestic magnesium prices have been dropping with great volatility entering 2022, which fell from 49,500 yuan/mt to less than 40,000 yuan/mt, down as much as 19.2%. The prices once rallied later amid news of environmental protection-related rectification. However, it is still in the downward trend for the time being.

The downstream estimate has been depleted after being stroke by the news front several times, and the high magnesium prices also contained the downstream demand, resulting in thin transactions and an awkward situation where there was literally no demand. In addition, some traders had built heavy stocks for speculative demand, and became eager to sell once the market fell to a stalemate, further dragging down the market.  

On the other hand, the market was quite bearish concerning future magnesium prices. According to the traders, magnesium exports rose greatly since Q4 2021, and the overseas participants have basically fulfilled or even over fulfilled their restocking demand. Currently, overseas aluminium smelters generally had sufficient stocks. As such, the terminal was increasingly unwilling to purchase when the prices have been falling for quite some time.

In the face of violently fluctuating magnesium prices, magnesium alloy companies are actively positioning themselves in the industry through production expansion, equipment upgrading, and introduction of high added value projects. A senior officer from a magnesium alloy companies said that “as the applications of magnesium are being expanded and promoted, the greatly fluctuating prices of raw materials are definitely adverse to the process. The market shall stay more rational regarding such price moves, and all market participants shall stay together to build a healthy and sustainable market.”

SMM believes that the concentrated downstream restocking in mid or late March may fall short of expectation in light of large exports since the beginning of the year. And the market is expected to maintain the current imbalance between high upstream stocks and sluggish downstream demand.